Accounting Policies

POLICY TITLE:

Leased/Financed Equipment

POLICY NUMBER:

APPL 11

DATE ISSUED:

February 1, 1996

DATE REVISED:

August 15, 1997

The issue of lease/finance vs. purchase must be addressed when purchasing equipment. In some cases, leasing equipment may be preferable to purchasing due to the nature of the equipment or technological currency issues. Financed purchases may be preferable in situations of budgetary/cash flow constraints. Leasing and financing do, however, increase administrative costs associated with processing encumbrances, monthly payments and corresponding accounting entries during the lease term. As a result, leases and financed purchases are not appropriate for equipment acquisitions less than $15,000.

Requests to lease or finance purchases must be submitted to the Treasurer's Office. The Treasurer's Office approval must be obtained in addition to normal approvals (see APPL02) prior to submitting the requisition to Purchasing. The Treasurer's Office will work with the requesting department to determine appropriate interest rates and terms and evaluate options. A minimum annual amortization of $5,000 will be required for any leases or financed purchases.